Archive for category: Stark

By Kim Stanger

Physicians and entities to which physicians refer may violate the Ethics in Patient Referrals Act (“Stark”) by mistakenly overpaying or underpaying amounts due under a compensation arrangement. For example, a hospital may undercharge a physician for rent, or a referring physician may receive payments in excess of his or her contract with a hospital due to a bookkeeping error. Because Stark is a strict liability statute, even minor unintentional mistakes can result in major penalties.  Fortunately, however, Stark establishes a grace period for parties to remedy overpayments and underpayments and avoid Stark penalties.

The Stark Problem.

Stark generally prohibits a physician from referring certain designated health services (DHS) payable by Medicare or Medicaid to an entity with which the physician has a financial relationship unless the transaction is structured to fit a relevant safe harbor. (42 USC § 1395nn; 42 CFR § 411.353(a)).  Stark affects many common financial relationships between physicians and DHS providers, including contracts for services, leases, directorships, loans, purchases, etc.  It applies to financial relationships between the physician and other entities billing for the physician’s services, including hospitals, employers, and even their own group practices.  Many of the common safe harbors applicable to such arrangements require that the compensation paid to or by the physician be set forth in a written agreement and represent fair market value.  (See, e.g., 42 CFR § 411.357 (a), (b), and (d)).  Problems may arise when the physician pays or is paid more or less than the contracted amount, either intentionally or by mistake.  Such actions will almost certainly cause the arrangement to fall outside the applicable compensation safe harbors, thereby subjecting the parties to Stark penalties, including prohibitions on billing, repayments, civil monetary penalties, and potential False Claims Act Liability.  (See 42 CFR § 411.353(b)-(d)). Read more

By Kim Stanger

Under the federal Stark law, hospitals and other healthcare employers may require that employed or contracted physicians refer items or services to the hospital or another designated provider subject to certain limits. (42 CFR § 411.354(d)(4); see https://www.hollandhart.com/requiring-referrals-from-employees-and-contractors). Effective January 19, 2021, CMS modified the rules for such directed referral requirements in physician agreements. If they have not done so, hospitals and other providers will need to update their physician agreements if they want to require employed or contracted physicians to refer designated health services to the employer. Read more